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Help with understanding expenses....??
Old 01-28-2011, 02:06 PM   #1
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Help with understanding expenses....??

I am looking for info on what is

1) a low vs high expense ratio

2) What is a redemption fee and what is a fair %

Here is an example of internetion equity thru Tiaa-Cref:


Net asset value as of 01/27/2011 : $10.46
Total return year-to-date as of 01/27/2011 : 2.35%
Fund's net invested assets as of 12/31/2010 : $2.70 billion
Gross Expense Ratio : 0.84%
Net Expense Ratio 1 : 0.84%
Inception date : 10/01/2002
Investment class : International
Redemption Fee 2 : 2.00%

Is the expense ratio fair/good if it is less than 1%. I have seen some posts mention that they look for .33% to be a real good %. Is this correct? SO .84% is a bit high?

How about the 2% redemption fee?

Thx for your help,

Manny
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Old 01-28-2011, 03:18 PM   #2
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I'd use Vangaurd's funds as a benchmark. I don't know enough about the TIAA-CREF fund to say which Vanguard fund is the best comp, but their International Index has an expense ratio of 0.32%.

So the question to ask is, what are you getting at TIAA-CREF for that extra 50bp per year? Does the fund target a segment of the market that isn't covered by Vanguard's lower cost funds? Do you have reason to believe that their stock pickers are going to earn more than the 50bp extra cost? Or, maybe, your money is in a 401(k) that doesn't offer better alternatives. Whatever the reason, I'd need to have one before I paid more every year for a stock fund.

The 2% redemption fee would be a deal breaker for me if there wasn't anyway to avoid it. Vanguard has a similarly sized fee, but it only applies to sales made within two months of purchase (to discourage "frequent" trading). I wouldn't own any fund that had a back-end load (redemption fee) that I had to pay.
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Old 01-28-2011, 03:27 PM   #3
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This is from the TIAA website about the redemption fee. Can anyone help me understand it? THX!

2.
You will be charged a 2.00% fee of the amount redeemed or exchanged out of the Fund within 60 calendar days of the initial purchase date. Please see the prospectus for details about this redemption fee and certain exemptions that may apply. The above performance data does not reflect the deduction of the redemption fee, and if reflected, the fee would reduce the performance quoted.
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Old 01-28-2011, 03:30 PM   #4
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I am a teacher and my districts vendors are mainly insurance companies. I have an appt with our districts person that can help me with my 403b vendor selection on Feb 9th but I want to go in with as much knowledge as possible.
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Old 01-28-2011, 03:36 PM   #5
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Originally Posted by mannyahles View Post
You will be charged a 2.00% fee of the amount redeemed or exchanged out of the Fund within 60 calendar days of the initial purchase date. Please see the prospectus for details about this redemption fee and certain exemptions that may apply. The above performance data does not reflect the deduction of the redemption fee, and if reflected, the fee would reduce the performance quoted.
This is fine. Just don't sell the fund within 60 days of buying it (which probably includes reinvested dividends) and you won't get hit with the fee. I think this is a reasonable restriction.
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Old 01-28-2011, 03:52 PM   #6
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Ok I understand it now. 60 days is very reasonable for sure. This is suppose to be a long term investment!
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Old 01-28-2011, 05:37 PM   #7
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Vanguard rarely gets beaten on expense ratios.
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Old 01-28-2011, 05:43 PM   #8
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Unfortunately, I won't have a full arsenal of Vanguards funds...just a small segment.
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Old 01-28-2011, 05:50 PM   #9
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To get an idea of the lowest expense ratios possible for mutual funds of various asset classes, please visit DFA vs. Vanguard and click on the "Here" links for more fund tickers, commentary, and expense ratios.

Basically, if you have a choice, there is no point in investing in any funds that are not mentioned at that web site. Unfortunately, you do not have a choice. So try to get as close to those expense ratios for a given asset class as you can.
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Old 01-28-2011, 05:51 PM   #10
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Originally Posted by mannyahles View Post
I am a teacher and my districts vendors are mainly insurance companies. I have an appt with our districts person that can help me with my 403b vendor selection on Feb 9th but I want to go in with as much knowledge as possible.
I'll repeat my suggestion to study the Pension2/CalSTRS option. I found it to be the best choice in terms of expense/cost when I was faced with making a selection from the same list of options you have posted elsewhere. Even though it hurts to see the low Vanguard expenses increased by 0.33%.

Here are the expenses for the "Build your own portfolio choices" in the Pension2 plan.
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Old 01-28-2011, 06:03 PM   #11
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Ouch .33% admin fee! That hurts lol
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Old 01-29-2011, 10:49 AM   #12
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To get an idea of the lowest expense ratios possible for mutual funds of various asset classes, please visit DFA vs. Vanguard and click on the "Here" links for more fund tickers, commentary, and expense ratios.
.
The folks on the web site you posted make this statement:


Quote:
Fee-only financial advisors generally charge a percentage of assets under management to manage a portfolio
That just doesn't sound right.
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Old 01-29-2011, 01:57 PM   #13
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I have an appt with our districts person that can help me with my 403b vendor selection on Feb 9th but I want to go in with as much knowledge as possible.
One mistake that you do not want to make is to assume that the "districts person" has much knowledge that can really help you to make a decision that is best for YOU. Your best person to rely on...is you. Read books ("Bogleheads Guide..." and others) search out 403(b) info sites that are unbiased and talk about passive investing and index funds. You are wise to stay away from vendors that have fees, commissions and above average ERs.

My wife's 403(b) selection was so bad that she never enrolled in it and chose to go the Roth IRA route at Vanguard instead of being charged large fees that would never help her, but would help others.
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Old 01-29-2011, 04:01 PM   #14
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I have a week and a 1/2 before my meeting to read and arm myself. I may have to sit on my thrown more often and for longer time!
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Old 01-29-2011, 04:36 PM   #15
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The folks on the web site you posted make this statement:
...
That just doesn't sound right.
Many people are confused by the term "fee-only". This does not mean "hourly fee-only". Fee-only also encompasses the AUM or assets-under-management fee that is often paid. It also means that they should not get commissions from products they sell or other kick-backs. And fee-only is not to be confused with "fee-based".

See also: 8 things your financial planner won't tell you - MSN Money
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Old 01-29-2011, 04:43 PM   #16
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I have a week and a 1/2 before my meeting to read and arm myself. I may have to sit on my thrown more often and for longer time!
How about pushing the date back a month or so? It will give you more time for research and producing questions that will keep you from making a wrong move. What's the hurry?
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Old 01-30-2011, 08:13 PM   #17
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The main thing is to get out of the high ER Meeder has me in. Anything will be better. I will go to the meeting and find what my choices are from all the vendors I have to choose from. I won't make any hasty decisions but an ER of 2.86% and 2.68% is rediculous.
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Old 01-31-2011, 08:52 PM   #18
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One mistake that you do not want to make is to assume that the "districts person" has much knowledge that can really help you to make a decision that is best for YOU.
+1 w/MickeyD

Go in assuming that the District HR (or whatever) person only know what the Life Insurance salesman told them at the free lunch they had at the Sheraton.

Prepare to be underwhelmed
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